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17 August, 16:31

The average annual return over the period 1926-2009 for the S&P 500 is 12.0%, and the standard

deviation of returns is 21.3%. Based on these numbers, what is a 95% confidence interval for

2010 returns?

A) - 1.5%, 21.8%

B) - 10.7%, 32.8%

C) - 30.6%, 54.6%

D) - 30.6%, 76.4%

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Answers (1)
  1. 17 August, 19:07
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    C) - 30.6%, 54.6%

    Explanation:

    95% Confidence Interval = (Average Return - 2*Standard Deviation, Average Return + 2*Standard Deviation)

    = (0.12 - 2*0.213, 0.12 + 2*0.213)

    = - 30.6%,54.6%

    Therefore, The 95% confidence interval for 2010 returns is - 30.6%,54.6%.
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